High Probability Entry Setups when traders are positioned the wrong side of the action

Above may be an well timed short selling example of how to put yourself in the ‘right area at the right time’ with your trades…of course the same example can also be flipped on its head for buying opportunities. What we term as a ‘shoulder’ (Lower High/Higher Low) is a prime entry setup with statistically high probability. The important thing to note is that it is used in conjunction with price action to correctly identity when traders are being ‘caught off-guard’ on the wrong side of the action and forced to close either for a small gain or a loss. We like to term it the ‘sweaty palm‘ feeling when you begin to realize that you are wrong and have to start to look for the exits and minimize losses. In the example on the German DAX Index, there were some great opportunities to sell (off the shoulders when sellers stepped in at lower levels and buyers were forced to bail) with a defined risk profile that paid out handsomely…if you are able to define the key zones and when traders will be put under pressure. The technique can easily be adapted to any product and improve your edge as it works on the psychology of traders and the action that follows when you realize that you may have a bit of a problem with the trade premise. Hope this helps and Happy Trading.